Over the past three decades, income inequality has grown dramatically. After remaining relatively constant for much of the post‐war era, the share of total income accrued by the wealthiest 10 percent of households jumped from 34.6 percent in 1980 to 48.2 percent in 2008. Much of the spike was driven by the share of total income accrued by the richest 1 percent of households. Between 1980 and 2008, their share rose from 10.0 percent to 21.0 percent, making the United States as one of the most unequal countries in the world.2 Moving even further up the income distribution, the share of income accruing to the wealthiest 0.1 percent of households – those with incomes of at least $1.7 million in 2008 – has grown sharply as well. In short, the evolution of income inequality in the United States is largely driven by the trends at the very top of the income distribution, as very wealthy households have continued to accrue an ever‐greater share of the nation’s total income.

The report includes the following graphs.

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It seems that the implication of the development in income distribution before and between the two crisis implies that for a more smooth economic activities there is a need for improvement in income distribution. I hope somebody would be able to verify this through an econometric analysis.

So much for free markets, deregulation and tax cuts for the rich Doh! Havent we been here before. In another time and place its called laissez faire economics (the economic policies favoured by the rich and powerful and the expense of everyone else). The only difference now is that they pay for their own “experts”, pay for their own “schools” and pay for their own “lobby groups” to convince everyone else its all a good idea….until it finally becomes obvious to those who make policy decisions (if there are any unpaid unvested interests left in the shells of government) that it was very bad policy. Perhaps when the ordinary man can no longer buy the goods the wealthy man has been subsidised (with our taxes) to produce…will the wealthy men wake up. That day is rapidly approaching.

The data is good but when you read the Report you will find it is marred by ridiculous partisanship — making it seem like the Clinton years were “great” for ordinary middle class Americans. Yes, Clinton did raise marginal tax rates on the very rich — but not to as high as they were under Reagan between 1981 and 1987.

However, Clinton also re-created the Capital Gains preference for very rich taxpayers — This produced a temporary windfall of income for the Federal Government during the stock bubble but it also contributed to a continued growth in inequality.

Also, it was CLINTON who acquiesced in financial deregulation which paved the way for the HOUSING BUBBLE to replace the TECH bubble.

All of the Report’s efforts to make Clinton the good guy and Bush the bad guy attempts to obscure the fact that from the inception of neo-liberalism (which really begins to triumph with Carter’s last two years) as ruling macro-policy in the US, there has been a steady trend upward in inquality and de-regulation — which has in some ways (see Saez’ data) replicated the 1920s …

Here we are in our version of the 1930s — and we’ve got no FDR in the White House and a gathering storm of proto-fascists outside the gates ready to create an American version of Mussolini’s Italy or worse — And unlike the 1930s, there’s no Communist and/or Socialist presence to force the establishment in a better direction.

Very scary.

[PS: I recommend Bob Pollin’s book CONTOURS OF DESCENT to show how Clinton’s Administration helped continue the trends begun under Carter and Reagan — my own book’s title tells my view: SURRENDER, HOW THE CLINTON ADMINISTRATION COMPLETED THE REAGAN REVOLUTION.]

Mike – well said. The trouble with the long sustained push towards more laissez faire economic policies is that it has been encouraged by political leadership of both persuasions over a long extended period of time. This is evident in the US and Australia and Im sure it would be seen in many countries. It has proved an insidiously tenacious belief set and still persists. Its been written into all the procedure manuals and no doubt “the guide to the would be political aspirant”….and it make take a awhile to shake yet.

There are still many market fundamentalists around who are claiming that government intervention in the housing market precipitated the latest crisis.

I have seen the documentation against this version in links from various blogs and articles, but do you know of any peer-reviewed academic literature which has presented or refuted this lassez-faire tale?

Thank you for this information. I just posted my thoughts on this unfair inequality of wealth and income distribution. I agree that it is bad economic policy, but I would like for our political leaders to name it and frame it as what it is: immoral.

The Irish Potato famine is an interesting historical example of the triumph of stupidity over experience so far as free trade is concerned. As the death rate from starvation increased by thousands and many more thousands began the long trek to the USA, so movements were made to try and stop the export of Irish food from Ireland (as had been done in the previous century) to save lives. The British equivalent of the GOP, the Tories, insisted that restricting free trade would bring about an end to civilization and that free trade would take care of the problem if left to its own devices. Thus a million Irish are estimated to have died, even as boats laden to the gunwhales with Irish beef and grain left for London to fill the pockets of the Anglo-Irish elite, surely some of the worst specimens of humanity that ever crawled out from under a stone. Laissez-faire capitalism isn’t a theory, or really even an ideology, it’s a psychological illness or the most obvious symptom of a sociopathic personality.

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